The covenant test before the certificate is due

A banking team can hold hundreds of facilities. The tests live in the document. The dates live in someone’s calendar. The numbers live in an email the borrower sent on a Friday.

The failure mode is ordinary. A leverage test is three weeks away, the certificate is not in, and the only person who knew the cushion left the team in March.

One facility file

Amendments, waivers and side letters attach to the facility they change. The test runs on the document that is in force, not on the draft that was easiest to find.

Each test stores:

• The definition, in the words of the document
• The ratio and the threshold
• The period
• The inputs, and where each number came from
• Who cleared the result, or who escalated it

A near-miss is a flag. It is not an email to the borrower. A person decides whether a notice goes out. The agent does not send one.

Shared with legal

When a test fails, or a clean-down date needs a notice, legal should open the same file. Forwarding a spreadsheet is how the clause and the number get separated.

This sits beside the credit system. It does not replace it. Certificates are read on the way in, compared with the last quarter, and parked when a figure does not tie.

In-house finance teams at a borrower can run the same clock from the other side: which test is next, which input is missing, which notice the agreement actually requires.